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Posts Tagged ‘Economist’

A League of its own: Italy’s political mess

Posted by hkarner - 21. August 2019

The Economist, 20/8

“Even the crisis is in chaos”, an Italian newspaper recently proclaimed. As Giuseppe Conte, Italy’s prime minister, prepares to address the Senate today, the possible outcomes are legion. Matteo Salvini, leader of the hard-right Northern League, one of two parties in Mr Conte’s coalition, has withdrawn his support (but not his ministers), so the prime minister may resign without waiting for a confidence vote. If one is held, it could go either way: the other party, the anti-establishment Five Star Movement (M5S), together with the centre-left PD and others could give Mr Conte a majority. Forming a PD-M5S coalition with a common programme, however, would not be easy. Given the parliamentary arithmetic, which he seems to have ignored until too late, Mr Salvini has tried to woo back the M5S. But on Sunday, M5S’s leaders slammed the door, describing him as untrustworthy. An election would suit the buoyant League. The forecast? Unseasonably foggy.

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Italy’s would-be strongman suddenly looks more vulnerable

Posted by hkarner - 17. August 2019

Date: 15-08-2019
Source: The Economist

Salvini stumbles

But nothing is predictable about Italian politics

Hubris is an occupational hazard for political leaders. Two of Italy’s recent prime ministers, Silvio Berlusconi and Matteo Renzi, stumbled just when it seemed they could do whatever they wanted. (Mr Renzi wanted to change the constitution; Mr Berlusconi wanted to hold “bunga bunga” sex parties. In both cases, voters objected.)

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Now Matteo Salvini, the leader of the populist Northern League, wants to ditch his coalition partners in the anti-establishment Five Star Movement (m5s), bring down the government that is led by Giuseppe Conte, an independent, and hustle the country into a snap election so as to give himself what he has termed “full powers”. This would enable him to impose, among other things, a radically expansionist budget for 2020. Mr Salvini claims that a “fiscal shock” is needed to jolt the moribund Italian economy back to life. Critics fear it could instead pitch the country, which has debts of over 130% of gdp, into a new financial crisis, along with the rest of the euro zone.

So the stakes were high when, on August 9th, the League tabled a Senate motion of no confidence in Mr Conte. Mr Salvini, a deputy prime minister, did not, however, withdraw either himself or his ministers from the cabinet—a move that would have made the fall of the government inevitable. And on August 13th, a hastily reconvened upper house rejected the League’s demand for a confidence debate to be held the very next day.

The luckless Mr Conte will still have to go to parliament to explain a crisis that is not of his making. But he will start his visit to the two chambers on August 20th, this date having been set by a majority that for the first time united the m5s with the opposition, centre-left Democratic Party (pd) and a handful of regionalists and independents. That raised the possibility that Mr Conte, who belongs to neither party in his coalition, might not get the thumbs-down, or that, if he resigned, a new government could even be formed, backed by the Five Stars and the pd. Den Rest des Beitrags lesen »

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Countries most exposed to climate change face higher costs of capital

Posted by hkarner - 17. August 2019

Date: 15-08-2019
Source: The Economist

Poor countries find themselves trapped in a vicious cycle

In east africa millions of people are suffering from a prolonged drought. Deadly typhoons are wreaking havoc in Vietnam. Honduran coffee-farmers are seeing their crops wither in the heat. Poor countries have less capacity than rich ones to adapt to changing weather patterns, and tend to be closer to the equator, where weather patterns are becoming most volatile. As the world heats up, they will suffer most.

By 2030 poor countries will need to spend $140bn-300bn each year on adaptive measures, such as coastal defences, if they want to avoid the harm caused by climate change. That estimate, from the un Environment Programme, assumes that global temperatures will be only 2°C above pre-industrial levels by the end of the century, which seems unlikely. Adding to the costs, research suggests that these countries face higher interest rates than similar countries less exposed to climate risks. This raises the prospect of a vicious cycle, in which the most vulnerable countries pay more to borrow, making adaptation harder and them even more exposed. Den Rest des Beitrags lesen »

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Eurocrats know Boris Johnson well, making no-deal Brexit more likely

Posted by hkarner - 17. August 2019

Date: 15-08-2019
Source: The Economist: Charlemagne

Familiarity breeds contempt

The last time continental Europeans felt they were dealing with an easily readable, straightforward British prime minister was in the late 1990s. Tony Blair charmed his continental colleagues. He wooed the French in their own language, led fellow heads of government on a bike ride through Amsterdam during a Dutch-led summit and made common cause with fellow “third way” social democrats like Gerhard Schröder, Germany’s then chancellor. Set against the backdrop of the “Cool Britannia” popularity of British music and fashion, this all suggested that Britain had finally cast off its conflicted post-imperial garb and was embracing a modern, European identity.

The glow faded when the Iraq war sundered Mr Blair from the French and the Germans. Then came Gordon Brown, David Cameron and Theresa May, who were all harder to place. All three made nice at European summits but flirted with the Eurosceptic tabloids at home. Mrs May took office in July 2016 after the country had voted for Brexit. But who was she? She ruled out a second referendum—then considered the most likely outcome in some continental capitals—but did not seem to be “of” the Brexiteers. At times she posed as a Thatcher-style Iron Lady; at others as a sensible Christian democrat. Buffeted by events, she was hard to define and left little lasting impression.

Boris Johnson is a different matter. Unlike his predecessors, Britain’s new prime minister is a familiar personality on the continent. Many in Brussels know him, by reputation or in person, from his time as a reporter there in the 1990s, when he spun highly exaggerated stories about the eu and helped pioneer the outraged Eurosceptic style in the British press. Continentals also know him from the London Olympics in 2012, when his performances as the capital’s buffoonish, zip-wire-riding cheerleader-in-chief caught the attention of the foreign press. Most of all they know him as the villain of the Brexit campaign; the man with a lie about the cost of eu membership on the side of his big red campaign bus who achieved the sort of victory of which nationalist populists on the mainland could only dream. Den Rest des Beitrags lesen »

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Markets are braced for a global downturn

Posted by hkarner - 16. August 2019

Date: 15-08-2019
Source: The Economist

The signals from bonds, currencies and commodities are increasingly alarming

Looking for meaning in financial markets is like looking for patterns in a violent sea. The information that emerges is the product of buying and selling by people, with all their contradictions. Prices reflect a mix of emotion, biases and cold-eyed calculation. Yet taken together markets express something about both the mood of investors and the temper of the times. The most commonly ascribed signal is complacency. Dangers are often ignored until too late. However, the dominant mood in markets today, as it has been for much of the past decade, is not complacency but anxiety. And it is deepening by the day.

It is most evident in the astounding appetite for the safest of assets: government bonds. In Germany, where figures this week showed that the economy is shrinking, interest rates are negative all the way from overnight deposits to 30-year bonds. Investors who buy and hold bonds to maturity will make a guaranteed cash loss. In Switzerland negative yields extend all the way to 50-year bonds. Even in indebted and crisis-prone Italy, a ten-year bond gets you only 1.5%. In America, meanwhile, the curve is inverted—interest rates on ten-year bonds are lower than on three-month bills—a peculiar situation that is a harbinger of recession. Angst is evident elsewhere, too. The safe-haven dollar is up against many other currencies. Gold is at a six-year high. Copper prices, a proxy for industrial health, are down sharply. Despite Iran’s seizure of oil tankers in the Gulf, oil prices have sunk to $60 a barrel. Den Rest des Beitrags lesen »

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What comes after Bretton Woods II?

Posted by hkarner - 15. August 2019

   Date: 14-08-2019
Source: The Economist: Free exchange

The world’s monetary system is breaking down

“THERE IS no longer any need for the United States to compete with one hand tied behind her back,” Richard Nixon, then America’s president, told his countrymen in August 1971. With that speech, he heralded the end of the postwar economic order, suspending the convertibility of the dollar into gold and putting up tariffs on imports. The survival of today’s order, which emerged from the chaos that followed, now looks increasingly in doubt. In other circumstances, its demise might not have been mourned. But with each passing August day, the prospects for a happy shift from one global monetary regime to another look ever grimmer.

The seemingly simple act of trading across borders is complicated by the fact that most countries have their own currencies, which move in idiosyncratic ways. Governments’ efforts to manage these wobbles are constrained by certain trade-offs. Pegging currencies to an external anchor to stabilise their value means either ceding control of domestic economic policy or restricting access to flows of foreign capital. Systems of monetary order, which resolve these trade-offs in one way as opposed to another, work until they do not. The context for America’s economic showdown with China is a system that worked once but no longer does. Den Rest des Beitrags lesen »

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Egypt is reforming its economy, but poverty is rising

Posted by hkarner - 10. August 2019

Date: 10-08-2019
Source: The Economist

Fast growth is not raising the incomes of the poor

Except for the glow of a mobile phone behind the watermelons, the fruit-and-vegetable shop on a busy Cairo street looks deserted. The owner says his wares are 25% more expensive than last summer. As prices rise, buyers skimp: regulars who used to buy a kilogram of fruit now settle for half. He keeps the lights off between shoppers to save a few pounds. There are no lights either at the butcher’s next door, who reckons revenues are down by 20%. “I sell a lot of bones for soup,” he says.

Last year Egypt vowed to halve poverty by 2020 and eliminate it by 2030. It is going in the wrong direction. On July 29th the national statistics agency released a long-delayed report on household finances. It found that 33% of Egypt’s 99m people were classified as poor last year, up from 28% in 2015. Even that dismal finding may not be dismal enough. The government has fixed the official poverty line at just 736 pounds ($45) a month, a figure that many economists say is too low. The World Bank said in April that 60% of Egyptians were “either poor or vulnerable”. Den Rest des Beitrags lesen »

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A wave of pro-democracy protests and elections sweeps the east of Europe

Posted by hkarner - 10. August 2019

Date: 09-08-2019
Source: The Economist: Charlemagne
Subject: The eastern summer

Europe is preparing to mark 30 years since the fall of communism. On August 19th Angela Merkel will travel to Sopron. With Viktor Orban, Hungary’s authoritarian prime minister, she will commemorate the anniversary of a peace protest on the border between Hungary and Austria that helped chisel the first chink in the Iron Curtain. The event will have a grotesque quality: a German chancellor celebrating the rebirth of democracy alongside a leader who is systematically dismantling democratic institutions in his country. And it will doubtless lift the curtain on an autumn of commentary lamenting the failed promise of 1989. Expect doleful references to Europe’s new east-west cleavage and sardonic asides about the predicted “end of history”.

The images from Sopron will not do central and eastern Europe justice. Democracy and liberal values have indeed come under attack in the region. The Economist Intelligence Unit (a sister of The Economist) finds that since 2006 democracy has deteriorated more there than in any other part of the world. And yet there have been quite a few glints of hope—especially in the past few months. Den Rest des Beitrags lesen »

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Can Parliament stop no-deal?

Posted by hkarner - 10. August 2019

Date: 09-08-2019
Source: The Economist

The government claims MPs cannot stop Britain leaving the European Union on October 31st. Yet many are determined to try

In march the House of Commons rejected the idea of a no-deal Brexit by a handsome 43-vote margin. Yet this week Dominic Cummings, Boris Johnson’s Svengali-like adviser, suggested that it was now too late for mps to stop Britain leaving without a deal on October 31st, the latest Brexit deadline. This position was echoed by a Downing Street spokesman and by the health secretary, Matt Hancock, who was previously strongly opposed to no-deal.

There are two parts to the argument. The first is that October 31st is now the default option, legally binding on both Britain and the eu. In the absence of some specific action, such as agreeing to another extension, Brexit will take place then. The second is that, given the imminence of the deadline, mps do not have enough power or time to prevent no-deal—unless the government co-operates. And Mr Johnson will not do that. Downing Street is threatening to force a no-deal Brexit even if the prime minister loses a no-confidence vote. Den Rest des Beitrags lesen »

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All aboard the gravy train

Posted by hkarner - 10. August 2019

Date: 09-08-2019
Source: The Economist

A consulting firm founded by an outgoing commissioner tests the rules
Will they now be tightened?

Come november 1st, 17 of the 28 European commissioners, one per eu member state, will be thumbing through their Rolodexes in search of their next job. (The rest have either been nominated for another term or won seats in the European Parliament.) Germany’s outgoing commissioner, Günther Oettinger, has wasted no time. At the end of July news broke that he had founded a political-consulting firm in Hamburg, where he plans to work after leaving office.

Mr Oettinger’s foray into political consulting has provided a test case for rules on commissioners’ post-term activities, which were recently revamped by the current European Commission president, Jean-Claude Juncker. The rules were tightened after his predecessor, José Manuel Barroso, who presided over the commission at the peak of the Greek sovereign-debt crisis, accepted a non-executive role at Goldman Sachs, an investment bank that is said to have profited from disguising the extent of Greece’s debt. Den Rest des Beitrags lesen »

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